Navigant Research Blog

Pool of Innovators in Microgrid Space Is Diverse, Often Incomparable

— October 5, 2015

Navigant Research’s recently published Navigant Research Leaderboard Report: Microgrid Controls is our first ranking of companies active in the microgrid market. The hardest part of this examination of innovators in this space was leaving so many market movers out, due to the focus on microgrid controls offered up by either developers or system integrators.

What if we were to turn the general assumption for the Navigant Leaderboard format on its head? In other words, why not create an apples-to-oranges listing? I am going to go out on a limb and highlight three companies not included in the Navigant Leaderboard report, but that deserve special mention due to their near-term impacts on the overall global microgrid market, regardless of what their role is. I have previously highlighted two companies, a utility (Commonwealth Edison) and an energy storage and smart grid innovator (S&C Electric) that were not included in the Leaderboard. Both were disqualified for inclusion because the ranking excluded utilities and vendors that primarily focus on energy storage integration.

Here are three other companies not included in the Leaderboard that I would like to highlight, for reasons explained below:

  • Energizing Company: Based in the Los Angeles area, Energizing Company is poised to announce one of the largest grid-connected microgrids in the world. The company sees its role as akin to a movie producer. (Well, what do you expect from a company based near Hollywood?) It doesn’t offer a controls platform and, though a private developer, sees utilities as its primary clients. It seeks to sponsor microgrids utilizing public-private partnerships. The company has fully embraced the concept of utility distribution microgrids with a plan for a microgrid to encompass an entire municipal utility’s service territory, optimized with smart grid technologies. It helps that the community this microgrid will serve is allegedly one of the smartest communities in the world (and I am not talking about IQ, but embedded infrastructure intelligence).
  • PowerStream: Ontario’s second-largest municipal utility, PowerStream, was the first utility in North America to announce a microgrid offering under a business model it refers to as DBOOME—design, build, operate, maintain, and energize. Perhaps the company’s most forward-looking project straddles what Navigant Research would identify as either a series of nanogrids or decentralized virtual power plants. Working with Sunverge—another company Navigant Research views as a microgrid leader—PowerStream will aggregate solar PV and lithium ion battery systems installed in residences in order to provide bidirectional value for customer and utility alike. The utility requires each customer to pony up some of their own money in return for long-term savings and exchanges of bidirectional energy services that serve both residence and utility grid.
  • Win Inertia: Among energy storage vendors active in the marketplace, Win Inertia is one of the most creative. Based in Spain, the company’s project portfolio highlights fascinating applications for hybrid battery solutions, including both alternating current and direct current (AC and DC) systems for electric vehicle (EV) charging, railways, harbors, buildings, islands or renewable integration for, of course, microgrids. Win Inertia has enjoyed 100% revenue growth since its inception and boasts a portfolio of over 15 microgrid-related projects either in operation or under development.

At last count, Navigant Research has profiled more than 50 active companies in the microgrid market, with none of them capturing more than 10% of the total market revenue. This is the status of the market today: there is no clear leader. The three companies profiled on this blog highlight the fact that innovation is coming from a variety of market players, each focused on a different part of the value chain.

Will one company emerge as the clear market leader? Only time will tell.


Volkswagen Scandal Deflates Clean Diesel Image

— October 5, 2015

We finally have a more important scandal to discuss than air pressure in footballs. On September 18, the U.S. Environmental Protection Agency (EPA) laid out a case for a notice of violation against Volkswagen. The issue? Computer software within Volkswagen clean diesel vehicles that allows the cars to sense an emissions test and activate emissions controls. The vehicles then could easily pass stringent U.S. Tier 2, Bin 5 emission standards. A Tier 2 vehicle must meet an average nitrogen oxide (NOx) emission limit of 0.07 grams per mile. However, when the programmed vehicles were not under emissions testing, emissions controls were disabled and Volkswagen vehicles spewed up to 40 times that level of NOx emissions.

Immediate Impacts

In a matter of days, Volkswagen lost $17 billion in shareholder value as the company’s stock plummeted over 30%. Volkswagen recently became the largest car seller in the world, selling nearly 10 million vehicles globally in 2014. The automaker will face up to $18 billion in fines from the U.S. government, and has also committed $7.3 billion toward recalling nearly 500,000 vehicles for the reprogramming necessary to comply with pollution standards. Volkswagen has also halted sales of affected 2015 models, and the EPA will not certify the company’s 2016 models.

While the U.S. market accounts for 6% of Volkswagen sales, the damage to the company’s environmentally responsible image is significant. Diesel vehicles account for over half of vehicle sales in Europe, and European government policies have made diesel fuels cheaper than gasoline. Emissions standards for diesels are also less strict in Europe compared to in the United States.

The U.S. Clean Diesel Market

Volkswagen TDIs represented nearly 30% of diesel sales in the U.S. market. Effective greenwashing campaigns by diesel automakers have created a reputation for diesel as a clean fuel source for our vehicles. Diesel has a higher energy density than fuel and diesel engines also operate more efficiently, so higher miles per gallon can be achieved. A clean image and a high fuel efficiency greatly increased the popularity of diesel models in the United States.

Whether arguing for or against diesel as a clean fuel source, it is important to discuss the emissions contents of diesel versus traditional fuel. Traditional fuel-burning vehicles give off higher yields of carbon monoxide and hydrocarbon emissions than diesel vehicles. These emissions are minimized by improved catalytic converter designs. Diesel vehicles emit more NOx, which in turn creates smog (ozone). The EPA is likely to take final action on stronger smog standards before the end of 2015. While diesel automakers utilize a variety of treatment systems to reduce NOx emissions, the Volkswagen scandal has significantly squashed the idea of diesel as a clean fuel source. How the public will respond to this breach of trust is yet to be seen.

Hybrid and Electric Vehicle Market growth

As the smog clears on the Volkswagen scandal, what opportunity is presented to hybrid and electric vehicles? As the image of clean diesel fades, the growing consumer base for fuel-efficient and environmentally friendly vehicles is expected to turn toward hybrid and electric vehicles. With the disgrace of the country’s most popular diesel model and growing interest in electrification, the auto industry may soon see a significant restructuring.


John Krafcik Takes the Steering Wheel of Google Car Project

— September 29, 2015

Someday, Google’s vision of cars without steering wheels, accelerators, or brake pedals may come to fruition. For the foreseeable future, however, intelligent people will still be necessary to guide the process of actually developing and building those machines. Incidentally, Google has just hired one of the smartest in the business, John Krafcik. The former Ford, Hyundai, and TrueCar executive is now the CEO of Google’s self-driving vehicle program.

As the former head of product planning and later CEO of Hyundai Motor America, Krafcik demonstrated his ability to run an operation that develops, manufactures, and markets vehicles to a mainstream audience. Prior to his decade with Hyundai, Krafcik spent 14 years at Ford, where he is reputed to have coined the term “lean manufacturing” in an article he wrote while working on his MBA at MIT.

Navigant Research’s Autonomous Vehicles report projects that by 2025, approximately 45 million light duty vehicles with at least Level 2 semi-autonomous capability will be sold globally every year. Level 2 is defined as a system that can automatically control at least two primary functions—such as steering and speed. Widespread adoption of Level 4 systems that can handle all primary driving functions without human intervention are unlikely before the 2030s.

Google and the Automotive World

For Google, Krafcik brings a reality check to the company’s automotive ambitions. Unlike Google’s primary businesses, the automotive industry is one of the most heavily regulated in the world, and the product can put lives at risk. Representatives from several manufacturers have acknowledged that they have been approached by Google about partnering on autonomous vehicles. However, Google’s approach so far has been to have manufacturers supply a vehicle platform while Google provides a black box of software that the manufacturers have neither control nor influence over. Given the many unresolved legal and ethical questions around autonomous vehicles, this approach has been rejected so far.

Krafcik knows how the auto industry functions and why it so often appears to be extremely conservative in rolling out state-of-the-art technology. He has a keen understanding of how to mass manufacture vehicles in high volumes and what mainstream consumers want in a vehicle. At the same time, he is an acknowledged risk taker in taking his companies into new market segments. Under his leadership at Hyundai, the brand steadily expanded from a second-tier purveyor of value, building credibility with consumers and critics so that it can now sell luxury cars like the Genesis without being laughed at.

Krafcik’s Credentials

This writer has known Krafcik for 8 years and he is clearly an engineer and manager that appreciates a challenge. Prior to being promoted to CEO at Hyundai’s American branch, the office had a rotating door of occupants who struggled with the home office’s demands. Krafcik managed to occupy the post for an unusually long 5 years and is likely the best candidate that Google could have hired.

Chris Urmson will continue leading the technical development side while Krafcik opens possibilities as this project evolves into a real business. Krafcik is well-respected in the industry, and if Google decides to pursue OEM partnerships, he is far more likely to be successful in brokering deals than those that have a distinctly Silicon Valley mindset. On the other hand, if Google opts to get into the manufacturing of cars, Krafcik knows that side of the business equally well—whether Google wants either its own factories or a contract builder like Magna Steyr to handle the work. Whichever path Google takes, the future looks interesting. And that is said without even knowing if Apple will get involved.


Are LCOE Analyses Still Useful?

— September 29, 2015

Earlier in September, the International Energy Agency (IEA) published its 2015 edition of the Projected Costs of Generating Electricity report. Not surprisingly, the report shows a dramatic fall in the levelized cost of energy (LCOE) for solar electricity and a minor fall in the LCOE for wind in comparison to the IEA’s 2010 report.

Several media outlets have highlighted that the cost of a kilowatt-hour (kWh) coming from renewables is now similar to—or even lower than—costs coming from fossil fuel technologies, and therefore are citing renewables as the cheaper option. While this may be true in certain scenarios, what the reporters and the LCOE analysis fail to highlight is that, while all kWh are equal, some are more equal than others.

kWh and World Cup Coverage

Take, for example, the Germany versus Argentina game from the 2014 FIFA World Cup. The price of a kWh in Germany at the end of this game rose to the high of €46/MWh, than dropped €15/MWh 2 hours later. In the evening, electricity production from wind turbines reached almost full capacity from the day’s demand. Then the next day, lacking an event interesting enough to keep televisions on, that demand plunged.  Location, like time of production, can also make a significant difference in the quality of a kWh. There is no data to support the following hypothesis, but demand in Argentina had to have dropped after Germany scored, while demand in Germany likely stayed high for at least a few more hours.

Simplifying LCOE

A traditional LCOE analysis would assume a capacity factor for a turbine depending on the local wind resource data, then aggregate the hours that the turbine is expected to operate in its lifetime, and finally divide the overnight (capital expenditures) and operating costs by the expected hours to get the LCOE. This made sense in a world where wind generation was managed primarily to follow demand. It was enough when the costs were multiple that of other options—like Feed-in Tariffs and basic net metering. In those options, energy quality is not the incentive, and the most common policy support mechanism is allocated toward wind and solar.

But in the world we are headed toward—where supply and demand for solar energy may not match—a newer, simpler metric that media outlets could use to educate people would be useful. For example, something like a revenue generation cost analysis (the cost of producing $1 of revenue) that takes into account the cost of delivering a kWh and the time in which it is delivered, could be more interesting to the public—and could even help in moving renewables policy and innovation forward.


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